5 July 2014

An Open Letter to All CEOs

In March my book The 20 Ps of Marketing was reviewed in the excellent quarterly publication of The Marketing Society of which I am a Fellow. The review was amazing saying “I would like it to be required reading for CEOs.” (See my blog The Persuasion of Colleagues 5th April, 2014 tag Marketing.) The irrepressible editor, Judie Lannon commissioned me to write a follow-up article on the theme for the June edition. That came out this week and here is an Unedited Version of the article.[i]

“Dear CEO, Here are ten things that CEOs need to understand about how to make their marketing function contribute more, (and the ten things you should not do!)

1. Product. Do get the Product (or service right) Marketing plays a key role here as it is, or should be, its responsibility to develop and test the Product. Up to 90% of new Products fail so it is clear that many CEOs have not got the right processes in place.

2. Price. Do get the Price right. This too is a marketing responsibility. It is not about marking up the input costs but maximising the value in the market place. There are different Pricing models but all should be based on the idea of delivering value to the end user.

3. Place, or distribution. Do make sure you hear the voice of your end user. In general if you sell your Product though distribution to end users (B2C) then you need to hear the voice of your company’s customers through sales who should be represented in the board room. You also need to hear the voice of your end user or consumer through marketing which should be represented in the board room. If you sell your Product directly to end users for their own use (B2B) then there is just one voice to be heard and it is probably best through a combined sales and marketing function.

4. Planning. Do Plan from first principles every year. This means asking yourself what business you are in, what are your points of competitive advantage and what actions you’re going to take to deliver improved customer value. This in turn will drive shareholder value.

5. Persuasion. Do allow marketing to take the lead because it represents the market in the decision-making process. To do this it needs to champion its cause. It will be an advocate for the brand, Persuading colleagues in other functions to follow that lead and ultimately Persuading customers and end users to buy the company’s Products and services.

6. Partnering. Do use business Partnering as a core strategy to grow, leveraging the assets of others to gain market position but equally allowing others to leverage your assets to do the same. It was good enough for James Gamble and William Procter, for Frederick Royce and Charles Rolls, for Pierre Wertheimer and Coco Chanel, for Dave Packard and Bill Hewlett, for Masaru Ibuka and Akio Morita, for Paul Allen and Bill Gates and for Steve Wozniack and Steve Jobs, so it’s probably good enough for you.

7. Power. Do recognise the Power that marketing can create whether it is Power to set prices, Power to resist the unfair demands of key customers, Power to innovate, or Power to control markets. This must always be tempered with humility as Lord Acton’s dictum that “all Power corrupts” is not just true of political Power but can also apply to market Power.

8. Positiveness. Do respond to things in a Positive way. The substance of management is organising as many People as possible to accomplish larger tasks by effectively drawing the best from each one of them. To do this you require personal magnetism. It is important for you to attract your People, that is, to be attractive enough to magnetise other People so that they willingly listen to you and work for you.

9. Professionalism. Do ask for Professionalism in your People. This is not so much about ensuring they have the right letters after their names as setting high standards yourself and asking everyone to do the same. In marketing this means, for example, that new Product recommendations will be evidence based, while creative proposals will be based on an agreed and well-written brief based on a proper analysis of the market, the current performance of the brand and the desired outcomes.

10. Passion. Do inspire and encourage Passion in your team. Marketing must have a Passion to instil lasting change. Anything less is a waste of time and invites mediocrity and eventually a reputation in the market for doing ‘just enough’ to be in the industry rather than leading it. The clear winners are those that turn Passion into a competitive weapon and get out of the blame game when a company doesn’t reach its goals.

And ten things you should not do…

11. Promotion. Don’t treat marketing investment as a discretionary cost. This can be divided into those efforts designed to build customer value and those designed to drive short term volume. Both can be subject to strict tests of Return on Investment but should be treated in that way, i.e. investments which must be made rather than discretionary costs which can be cut at will to improve short term earnings. Of course, it is vital that reward structures reflect this including your own.

12. Packaging. Don’t worry too much about the design of the logo. The logos for Mercedes Benz and the Campaign for Nuclear Disarmament are very similar but have totally different meanings. The most famous logos in the world, the Christian Cross and the Mohammedan Crescent, are recognised by their followers for their symbolic meaning, not their design quality.

13. Publicity. Don’t run Corporate Social Responsibility as a separate department. Instead make it core to your business. Unilever is setting the pace here with its sustainable living plan whereby sustainability is the driver of everything it does so that each time a consumer chooses one of its Products, it improves their life, their community and the world we all share.

14. Push-Pull. Don’t sell what you make, make what you sell. Organise your supply chain so that it is responsive to the demand you create and so avoid excess inventory and discounting or even worse, waste. Take responsibility for the whole supply chain and don’t just move the problems of excess inventory upstream. Understand the importance of scarcity in maintaining margins.

15. Positioning. Don’t try to push your branding messages through a wall but rather send them in through an open door by the correct Positioning of the brand. In a world where consumers are deluged in marketing messages from morn till night understand that communication can only take place at the right time and under the right circumstances. Your marketing People should be able to answer the question ‘What is your Positioning?’ with a clear articulation of what the brand stands for.

16. Profit. Don’t rely on cost-cutting to make a Profit. It is marketing that earns your Profit through delivering customer value. There is increasing evidence that cost-cutting is a losing strategy. It may well be that in the short term focus on cost-cutting will deliver improved margins and drive your share Price thus earning you much gold. But in that case your Remuneration Committee is at fault because you should be rewarded for creating long term sustainable shareholder value. Any fule kno how to cut costs. Driving real customer and shareholder value takes skill and courage.

17. Productivity. Don’t be fooled by sell-in data. Your measurements should focus on sell through data and even better, on data about satisfied customers. One of the reasons Sony got into trouble over Betamax is that the factories regarded the goods as ‘sold’ when they shipped them to the sales companies. But as the unsold products piled up in the warehouses around the globe the sales companies were forced into violent Price cuts to move the gear. Of course, noone ever burns this stuff. They just sell it at a loss.

18. Perception. Don’t listen too much to the sales force. I started out as a salesman but sales forces become very adept at making excuses. Kozo Ohsone, who was responsible for developing the Walkman, collected a list of the standard excuses Sales Companies made in their reports for failing to meet targets and gave me a copy. Number 6 on the list was ‘the weather was too bad.’ Number 14 was ‘the weather was too good’. Sales forces also like to tell you what the competition is up to. This can be useful information but you really want your marketing People coming up with their own original Plans how to outfox the competition.

19. People. Don’t manage People, empower them. Instead of commanding, coach your team and organisation towards success. Cultivate respect by giving it, instead of demanding it. Know how to manage both success and failure. Show graciousness in your management rather than greediness. Be humble about your successes and, whenever possible, give someone else the opportunity to shine. Johann Wolfgang von Goethe summed it up when he wrote, ‘Treat People as if they were what they ought to be and you help them to become what they are capable of being’.

20. Personality. Don’t discourage the expression of Personality. Personality is a key element in developing leadership styles. In assessing someone in business I want to know what they have made of themselves. As Erich Fromm said: ‘Man’s main task in life is to give birth to himself, to become what he potentially is. The most important Product of his own effort is his own Personality.’

About sixty years ago Peter Drucker, the Grandfather of modern marketing, wrote “Business has only two functions — marketing and innovation. All the rest are just costs”. It was true then, has been true ever since and is still true. Why then do most boards spend most of their time talking about the costs? Why are the costs listed in detail in the profit and loss statement while the pages in the annual report talking about innovation and marketing are vanishingly thin? The enlightened CEO will empower himself and his people by grabbing hold of these two ideas and putting them at the front of everything he or she does.

Yours in friendship

David Pearson (former CEO)”

This is not the order I put the 20 Ps in the book, but re-ordered to suit the brief of Ten Do’s and Ten Don’ts. If you want to read them in full in the right order there is a direct link to the publisher on the Home page of this website.

[i] Reproduced with permission of Market Leader, the strategic marketing journal for business leaders. To subscribe visit www.warc.com/bookstore copyright Warc and The Marketing Society.